Monday, September 29, 2008

Everybody fightin' about a spoonful

Men lie about that spoonfulSome cry about that spoonfulSome die about that spoonfulEverybody fight about a spoonfulThat spoon, that spoon, that spoonful

— Willie Dixon, "Spoonful"

It's not a spoonful of your precious love they're fightin' over, child. It's a spoonful of cough syrup, and the trouble is, it's supposed to cure the American financial system's congestive heart failure.

Actually, there are a couple of fights going on. One — possibly the least important — is in Congress over the terms of the $700 billion bailout of the banking industry. Least important because it's not over the principle of the thing. It's over the Post-it notes that Congresswimps want to attach to the bill. The motive is to give a little juice to their favored constituents — mainly symbolic, but they can point to it and say, "See, I was looking out for you" while they were voting to take aboard worthless securities obtained from banks cynical enough to create them, or stupid enough to buy them.

The seven hundred billion is only a spoonful. It might restore Wall Street's trust in banks (or might not), but it won't restore the world's trust in the U.S. Treasury — and for years the government has been financing mind-boggling deficits by selling Treasury bonds to foreign governments who figure it's the price of doing business with us (i.e., selling us stuff we no longer make ourselves). It won't require financial institutions who have been tossed a life preserver to issue any home or car loans, but even if they choose to, we'd better hope they show infinitely better judgment about their lending standards than they did before. Yet why should they if they know they can always go to the Treasury for a reset?

Taking the heat off the banks — no guarantees that it'll work, mind you — won't be balm for homeowners and would-be homeowners. Not as long as home prices are stuck in orbit. What's next, a government takeover of every empty suburban mini-Hearst Castle, to be sold for half price, while flogging bonds to Sierra Leone and Turkmenistan to absorb the other half?

But the bigger fight, if there is enough determination left in this country to have one, is over the pending transition of our economic model into something Comrade Lenin would recognize: a state-controlled economy. We've been slouching our way toward this for some time. Part of the reason for the housing crisis is that the federal government insisted on banks giving ridiculous loans, bound to turn rancid, to minorities for the sake of political correctness. But the stakes are larger now by far. This bailout makes plain the state of things:

Our Congress has become representative at last. Only it's not the people in the home state or district it represents, but the big money interests and their lobbyists. Fiscal responsibility has been turfed out — we'll go on piling up debt on top of debt until even our overseas creditors decide our markets aren't worth the cost (especially when Americans not of the corner office class can't afford to buy those alluring imports anymore) and refuse to play the game. And the Treasury will click on the soft option (until the consequences) of currency inflation, the first and last resort of governments that think they can run an economy. Ask the Zimbabweans.

Centralized power, controlling everything from interest rates to corporate mergers to the size of the bananas you can sell. Not to mention what you can say and write. The European Union is already there, and is smugly sure we will be too before long. Some Americans wouldn't mind at all. The state as mother and daddy, looking after its dependents, transferring wealth to those it finds worthy, taxing and borrowing to the limit to dole out grandiosely, asking only the end of individuals' power to pilot their own lives, choose for themselves, think for themselves.

Maybe a free citizenry, responsible to itself and bending the knee to no one, is bound to be transient. What was bought at a high price comes to seem the natural order of things. Whatever anybody wants, including perfectly reasonable desires like good health care, turns into a supposed right rather than something that must be paid for one way or another. It seems a simple solution to life's struggles to demand that the government provide everything, arrange everything, fix everything.

But governments are composed of fallible human beings with their own power drives and self-serving motives. They have no money, except what they can tax, take, or borrow. Sooner or later, all those reach a point of diminishing returns. Franklin Roosevelt's campaign manager came up with the perfect formula for his times: "tax and tax, spend and spend, elect and elect." But eventually the middle class drew the line at further taxation. Today's variation among the political mandarins is: "borrow and borrow, spend and spend, elect and elect." We've long since passed the point of being able to borrow enough from ourselves or even our descendants; we're debtors to the world. And the world is starting to ask, why do we need to keep supporting these spoiled babies who can't control their appetites or stop their currency's value from melting?

A very old story: Back around 490 B.C., the Persian king Darius sent envoys to Athens and Sparta to demand earth and water, emblems of submission. The Spartans threw the envoys down a well, telling them to take earth and water from it and deliver it to King Darius.

An admirable impulse but bad behavior, and for sometime afterward the ritual sacrifices gave threatening omens to the Spartans, who were also known as Lacadaemonians. The Spartans were troubled by the omens, and eventually asked if there were any among them who would give their lives in atonement. Two noble youths volunteered, and traveled to the land of the new Persian king, Xerxes, to offer themselves as sacrifices to offset the bad karma from killing Darius's representatives.

Herodotus narrates:

On the road to Susa they presented themselves before Hydarnes. This Hydarnes was a Persian by birth, and had the command of all the nations that dwelt along the sea-coast of Asia. He accordingly showed them hospitality, and invited them to a banquet, where, as they feasted, he said to them, "Men of Lacadaemon, why will you not consent to be friends with the king? You have but to look at me and my fortune to see that the king knows well how to honour merit. In like manner you yourselves, were you to make your submission to him, would receive at his hands, seeing that he deems you men of merit, some government in Greece.

"Hydarnes," they answered, "you are a one-sided counsellor. You have experience of half the matter, but the other half is beyond your knowledge. A slave's life you understand, but never having tasted liberty, you can not tell whether it be sweet or no. Had you known what freedom is, you would have bidden us to fight for it, not with the spear only, but with the battle-axe."

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Olympus, where the abode of the gods stands firm and unmoving forever, they say, and is notshaken with windsnor spattered with rains,nor does snow pile ever there, but the shining bright airstretches cloudless away,and the white lightglances upon it.

MONEY

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